AMBASSADOR,S MEETING WITH PETROLEUM AND MINES

C O N F I D E N T I A L QUITO 000961 SIPDIS TREASURY FOR MEWENS DEPT FOR WHA/EPSC FAITH CORNEILLE E.O. 12958: DECL: 10/04/2018 TAGS: EPET ENRG EINV ECON EC SUBJECT: AMBASSADOR,S MEETING WITH PETROLEUM AND MINES MINISTER CHIRIBOGA REF: A. QUITO 681 ¶B. QUITO 683 ¶C. QUITO 525 ¶D. 06 QUITO 1395 Classified By: Ambassador Heather Hodges, Reasons 1.4 (b) and (d) ¶1. (SBU) Summary: The Ambassador paid a courtesy call on Minister of Petroleum and Mines Galo Chiriboga on September ¶18. Chiriboga emphasized ongoing cooperation between Ecuador and the U.S. in the energy sector, and highlighted the importance of private investment. He mentioned that the GOE was near resolution in its investment dispute with U.S. company Machala Power, and that he expected a new mining law by the end of the year. End Summary. Chiriboga Emphasizes Cooperation -------------- ¶2. (U) Minister Chiriboga emphasized cooperation between the U.S. and Ecuador on energy issues. He noted that the GOE had come to agreement with U.S. petroleum operator City Oriente July 31 to terminate the company's contract in Ecuador (ref A),and commented that there were no other pending government issues with U.S. firms in the oil sector. The Ambassador raised the Chevron lawsuit as an issue of continued high concern to the United States. Chiriboga acknowledged the issue, but deflected discussion, saying this was a private sector issue. (Note: Chiriboga also overlooked two U.S. companies - Murphy and Burlington - that have minority shares in petroleum concessions that are being renegotiated and have filed for international arbitration.) ¶3. (U) Mentioning the Refinery of the Pacific (a project the GOE is pursuing with Venezuela's PDVSA, ref B) and the potential for natural gas exploration in the Gulf of Guayaquil as examples, Chiriboga noted that the country was open to private investment in petroleum projects. He believed services provided by private companies would be key to completing these projects, and cited the company ARB Ecuador (a subsidiary of U.S. construction company ARB which is currently doing pipeline work in Ecuador) as such a provider. Machala Power Dispute Close to Resolution -------------- ¶4. (C) Chiriboga said that the GOE was close to reaching agreement with U.S. electricity generator and natural gas producer EDC/Machala Power, which had several disputes with the GOE and an international arbitration case (refs C, D). He hoped to issue a statement of agreement with Machala the following week. (Note: Local Machala Power General Manager John Tomich told econoff that the GOE was willing to pay Machala's outstanding debt and sign a statement "agreeing to resolve the remaining outstanding issues." However, he did not think the company's Houston headquarters would agree to drop arbitration based on such a weak commitment.) ¶5. (SBU) Finally, Chiriboga noted that a draft mining law had been presented to the President for review, but did not give details on the law. Following Ecuador's constitutional referendum, he said, the draft law would be passed to Ecuador's interim legislative body in hopes of approval by the end of the year. COMMENT: -------------- ¶6. (C) Chiriboga was intent on showing that the GOE is ready to work with U.S. companies in the energy sector. Following the meeting, Chiriboga issued a press release echoing the same message. Some of this was sincere: the GOE worked out its differences with City Oriente and seems to be working hard to resolve its problems with Machala Power/EDC. However, some of his message is a stretch: the U.S. service company he cited is not known to any of Post's petroleum industry contacts, and he overlooked Murphy Oil's and Burlington's arbitrations against Ecuador. HODGES